Investment Column: Fyffes worth holding for the long term

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The Independent Online

As well as being eaten as a food, bananas are used to make medicine, beer and health products, and the stalk and leaves to make cloth and even dwellings. This is one of the "fun facts" that you can find on the website of Fyffes, the fruit distributor.

As well as being eaten as a food, bananas are used to make medicine, beer and health products, and the stalk and leaves to make cloth and even dwellings. This is one of the "fun facts" that you can find on the website of Fyffes, the fruit distributor.

While bananas are not the only fruit that Fyffes ships around the globe, it is its most important product. There has been much relief in recent weeks that banana prices have held up in Europe, despite the enlargement of the European Union. The worry had been that enlargement would drive down costs further in this low-margin business. This is still a risk, but is priced in to the shares.

Trading at this Dublin-based company, controlled by the McCann dynasty, is volatile and at the mercy of currencies, harvests and the weather. Fyffes blamed a profits warning last year on the hot weather affecting demand for tropical fruit, but by the end of the year it had clawed back all its losses. The volatility, too, is priced in to the stock, valued at 10 times the conservative earnings forecast.

Carl McCann, the chairman, told shareholders at the annual meeting that there will be further bonuses this year from the disposal of some properties and the acquisition of Everfresh, a Swedish distributor. Further property deals and acquisitions are expected this year.

The shares were up 3.5p to 110p, compared with 81.25p when we tipped them in 2002. With healthy eating moving up the agenda, demand for fruit is not going into reverse, and the shares, with a dividend yield of just below 4 per cent, are still worth holding for the long run.

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